The Hindu Editorial Discussion is crucial for UPSC CSE preparation, offering in-depth analysis of current affairs, government policies, and socio-economic issues. It enhances critical thinking, answer-writing skills, and interview preparation by providing diverse perspectives on national and international developments. Regular editorial reading helps aspirants develop a balanced viewpoint, improving their essay writing and General Studies papers.
1. Breaking China’s chokehold over the critical minerals supply chain
China has systematically consolidated its dominance over the global critical minerals supply chain, particularly for lithium, cobalt, nickel, and rare earth elements (REEs). These minerals are essential for manufacturing modern technologies, including electric vehicles, semiconductors, and renewable energy systems. Through its Belt and Road Initiative (BRI), China has leveraged state-backed investments, syndicated lending, and strategic acquisitions to outmaneuver global competitors, including India. To counter China’s influence, India and its allies must adopt a strategic, coordinated approach to secure mineral assets and build resilient supply chains.
China’s Strategy: Financial Muscle and Syndicated Lending
A. Repurposing BRI Lending Institutions
China’s control over critical minerals is driven by its ability to restructure the lending mechanisms of the BRI. Initially, policy banks such as the China Development Bank (CDB) and the Export-Import Bank of China (China Eximbank) financed mineral extraction. However, as environmental and repayment risks grew, China shifted to syndicated loans involving state-owned commercial banks like the Industrial and Commercial Bank of China (ICBC), Bank of China (BOC), and CITIC Bank, along with non-Chinese lenders.
By 2021, 79% of China’s critical mineral loans were syndicated, enabling it to spread financial risk while maintaining control. A prime example is the $1.59 billion syndicated loan used for China Molybdenum’s acquisition of the Tenke Fungurume cobalt-copper mine in the Democratic Republic of Congo (DRC). This model allows China to outsource due diligence while retaining strategic oversight.
B. Non-Public Debt and Offtake Agreements
An important feature of China’s financing strategy is its use of “non-public debt.” About 81% of China’s critical mineral loans are directed toward Special Purpose Vehicles (SPVs) and Joint Ventures (JVs) rather than host governments. These entities, often majority-owned by Chinese firms, allow Beijing to bypass sovereign liabilities while securing long-term offtake agreements for mineral supply.
For instance, in the DRC, Chinese entities control 51% of cobalt exports through JVs like Sicomines, where infrastructure loans are collateralized against future mineral revenues. This ensures that raw materials flow directly to China’s refineries, which process: 73% of the world’s cobalt and 59% of global lithium
China’s Edge Over Western Competitors
A. High-Risk Investments and Patient Capital
China’s dominance is further strengthened by its willingness to fund high-risk acquisitions. According to AidData, China has invested $56.9 billion in critical minerals since 2000, with 66% of this financing ($37.6 billion) directed at just 14 megaprojects in eight countries.
For example, in Peru, China transformed itself into the largest copper investor by providing: 16 loans totaling $15.4 billion for the Toromocho and Las Bambas copper mines (2010–2020)
In contrast, Western firms, constrained by shareholder pressure, ESG norms, and financial risks, have withdrawn from high-risk ventures. When Freeport-McMoRan (a U.S. mining company) exited the DRC in 2016, Chinese firms immediately stepped in, acquiring assets with state-backed loans.
B. Subsidized Loans and Concessional Financing
Unlike Western credit agencies, China’s export credit institutions are not bound by OECD (Organisation for Economic Co-operation and Development) rules on concessional lending. This allows China to offer subsidized loans to domestic firms, making it more competitive.
AidData highlights that 83% of China’s critical mineral loans meet or exceed the OECD’s 25% grant element threshold, making them more attractive than Western financing options. Additionally, China prioritizes rapid project execution, often bypassing environmental and social safeguards, giving it an edge in: Argentina (lithium), Zambia (copper), Indonesia (nickel)
India’s Late Start and the Need for Strategic Alliances
A. Challenges Facing India
India’s National Critical Mineral Mission aims to secure mineral assets abroad and enhance domestic refining capabilities. However, compared to China’s BRI-driven investments, India’s efforts are still at a nascent stage.
For instance, India’s overseas mining investments, such as Khanij Bidesh India Ltd.’s (KABIL) lithium exploration in Argentina, remain small in scale compared to China’s $3.2 billion lithium portfolio in Latin America.
B. Leveraging Strategic Partnerships
To counter China’s dominance, India must strengthen alliances and diversify its critical mineral supply sources through:
(i) The Quad (U.S., Japan, Australia, India)
(a) Facilitates joint investments, risk-sharing, and supply chain coordination.
(b) India is already engaging with Australia’s lithium sector, a model that can be expanded to other regions.
(ii) Minerals Security Partnership (MSP)
(a) A U.S.-led initiative focused on developing ESG-compliant supply chains.
(b) Can help India secure alternative sources of lithium, cobalt, and REEs.
(iii)Bilateral and Regional Collaborations
(a)Africa and Latin America: Resource nationalism in these regions is growing, providing an opportunity for India.
(b) The DRC’s renegotiation of the Sicomines deal, securing $7 billion in additional infrastructure funding, indicates a willingness to reduce Chinese influence.
(c) Chile’s lithium nationalization signals another opening for India to engage in equity-sharing JVs and technology transfers.
Infrastructure and Alternative Trade Routes
India must invest in infrastructure projects that reduce reliance on China-dominated trade routes. One such initiative is the Lobito Corridor project—a U.S.-EU-backed rail link connecting: Angolan ports → DRC mines → Zambian copper belt
This model can serve as a blueprint for future mineral transport networks that bypass Chinese-controlled logistics chains.
Conclusion
China’s dominance over the critical minerals supply chain is not just an economic strategy but a geopolitical tool to control the green energy transition. India, despite its late start, can counterbalance China’s influence by:
(i) Expanding its financial capacity for overseas mineral acquisitions
(ii) Strengthening alliances through Quad and MSP partnerships
(iii) Offering alternative investment models with ESG compliance
(iv) Investing in infrastructure to diversify supply routes
To avoid being sidelined in the global race for critical resources, India must act swiftly, integrating strategic financing, international collaborations, and domestic processing capabilities into a cohesive national strategy.
Disclaimer:
This analysis is based on the editorial content published in The Hindu and is intended solely for informational and educational purposes. The views, opinions, and interpretations expressed herein are those of the author of original article. Readers are encouraged to refer to the original article for complete context and to exercise their own judgment while interpreting the analysis. The analysis does not constitute professional advice or endorsement of any political, economic, or social perspective.
Follow Fusion IAS
